Economic outlook for Metro Houston in 2023 ‘Pretty good’

By Katherine Paradis

Patrick Jankowski gave his muchanticipated yearly presentation on the economy before a lunchtime meeting of Bay Area Houston Economic Partnership membership in late February at Lakewood Yacht Club.

Jankowski is the senior vice president of research and chief economist at the Greater Houston Partnership. He oversees the Research Department which provides information gathering, data analysis, and economic forecasting for the Partnership's 10 divisions. His presentation, Growth, Stagnation or Recession: The Outlook for Metro Houston in 2023, began by looking back three years at COVID’s effects. Jankowski said that COVID is not the threat to Houston it once was. He then displayed a photo of Jerome Powell, chairman of the Federal Reserve. He said, “The threat to Houston is this guy,” much to the amusement of those in attendance. Jankowski justified that comment because of what the Fed is trying to do to control inflation.

Causes of inflation

Jankowski reported that there is no one cause of inflation, and that’s where the challenge lies. The Department of Congress injected new money into the economy with three stimulus packages totaling $6.4 trillion. Jankowski felt that just one package would have been enough to stimulate the economy.

According to Jankowski, ironically, the cure for high prices is higher prices. If you make something more expensive, either fewer people can afford it, or people simply decide not to purchase it.

The Federal Reserve is trying to raise interest rates so that anything you purchase on time becomes more expensive. Eventually, supply and demand come into balance, said Jankowski. He added that he wouldn’t be surprised if interest rates go up another full percentage point this year.

Recession?

Is a deep and protracted recession possible?

Yes, Jankowski confirmed, but only due to things that we have no control over – such as the corona virus. He said, “If the war in the Ukraine escalates, that could really screw up the global economy. I worry about cyber-attacks. We’ve been under-investing in the oil and gas industry for so long, if we see a pickup for demand in energy, we could see energy prices spike.”

What are the probabilities for a recession?

Jankowski predicts that the odds are 30 percent for a mild recession, 50 percent for a nearmiss, and 20 percent for a deep and protracted recession. In an eye-opening statement, Jankowski said that we are the biggest risk to the economy right now. He explained that if people believe we are in a recession, it will affect their behavior. They will pull back on their purchases, their investment decisions, their hiring decisions. It then becomes a self-fulfilling prophecy.

In conclusion

Jankowski closed by saying, “We do have a lot of momentum going into this year. I think Houston’s going to do fine. If, if, if the U.S. slips into a recession this year, it’s not a permanent state of being. There is ample opportunity for growth. We just need not to fixate on the possibility of a downturn and realize that long-term things look pretty good.”

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